Tax-free shopping: how does it work?

Tax-Free is a common payback system that returns you the money spent abroad. These are the money that foreign citizens are supposed to be payed back when crossing the border. If you have never used this service you will be very disappointed as have lost a lot of money.

First of all, you have to constantly live outside the country where you made a purchase. In case of European countries, you must be a citizen of non EU-country. If you have any document that allows you to live or work in the country for more than 6 months you can’t expect to get your money back. Long-term tourist visa does not refer to these documents.

Due to tax free you can get from 7% to 23% of refund back (depending on the VAT size).

These rates are different in all countries. For example:

Czech Republic – 20%

Finland – 23%

France – 19%

Italy – 21%

However, don’t expect to get 20% of refund when having purchased 100 EUR worth item. Remember that the price already includes VAT what means that 100 EUR equals 120% of the price.

How to count tax-free amount?

This is very simple. Divide the price by 120 and multiple on the VAT size. For instance, if you bought a pair of jeans for 100 EUR in Czech Republic you can expect to get 16,66 EUR back.

(100/120) * 20 = 16,66 EUR

In Finland formula will be the following (23% VAT):

(100/123)* 23 = 18,69 EUR

However, this is not the total amount. Usually there is a mediator who helps you to receive this refund. The most popular tax-free provider is Global Blue. They take a certain rate from every deal. For example, if you spent 195 GBP the VAT would be:

195/120*20= 32,5 GBP

In this case Global Blue will take 5% commission of the price (the price that you payed+VAT) what equals 9,75 GBP. Moreover, you will get eventually around 11% refund. Usually the higher the price you have payed the lower the commission of Global Blue is. You can easily count the refund on their website.

How to make tax-free?

In order to get your money you have to go through three simple steps.

Ask shop assistant about tax-free receipt

When you have chosen what to buy and are just about to pay ask the shop assistant to give you tax-free receipt. Don’t forget your passport because most stores refuse to give it without passport. However, there are those who do but you will need to fill in the form later.

How to fill it in?

You must fill the form in with capital letters. Be attentive when writing your first name, last name, passport details and email address. Also it is necessary to attach the cheque to the form.

However, remember that you can’t use tax-free services in all stores. Pay attention at special signs.

One more thing to take into consideration is the minimum purchase amount. In Great Britain it is 30 GBP, in Finland – 40 EUR, Italy – 155 EUR. Moreover, you have to make purchases in one store within one day. If you spent 160 EUR in one store and then 140 EUR in another one, you can expect to get tax-free only in the first case. Therefore, if you see that you need to spend 10 EUR more to use tax-free services – do it.

VAT for food are lower and equals 4-5% on average. Depending on the country tax-free services may also cover books, clothes and shoes for kids and other goods. In the same time some countries do not provide tax-free for books, food and tobacco.

Tax-free for food and non-food products must be counted separately. So if you miss 10-15 EUR to the minimum tax-free amount it is better to buy non-food goods like clothes, devices, accessoires).

It is better to make purchases in big shopping malls like Printemps, Galerie Lafayette in Paris, Harrods and Selfridges in London. Here tax-free will be counted in total and not separately for each purchase in separate store. However, before buying something expensive ask shop assistants about tax-free. For example, in Printemps shopping mall you can not get a refund in Louis Vuitton boutiques. Sometimes companies don’t give cheques but invoices. But don’t worry, you will still get the money back but only in the stores where you made a purchase. First you get a stamp at customs and then send them to the store. The advantage of this method is that you won’t pay any rates to mediators.

Get a stamp at customs

When you are at customs take all your papers, cheques and passport and give it to customs officer. If you continue to travel within Europe you must put a stamp at the last European country when leaving the border. If you travel by plane you should arrive one hour before the registration starts. There may be a lot of people and you will have to wait. Also if you flight departs late at night the customs may be closed and you won’t be able to go through all these procedures to get your money back. Beware to come by 9 p.m.

Customs officer can ask you to show your purchased. It is important to provide new stuff that you haven’t worn yet.

Cash out your cheque

You can get the money only if there is a customs stamp on it. You can receive the money on your credit card or by cash.

What if you don’t get a customs stamp?

You have three months to get a stamp at customs. You can do it at your next trip but don’t forget your stuff with you to show at customs. Moreover, as we mentioned above keep them new and unworn.

Where to get the money?

Tax-Free Cash Refund. You can find it in the airport or in the center of the city. In second case you will get the money and a cheque which you will have to provide then in the airport. Then the officer will take a look at your purchases and put a stamp. You will have to put the cheque into a box.

Tax-Free Box in the airport. Put your cheque and tax-free form into a special box in the airport. Carefully fill in your bank account data to get the refund.

In a Tax-Free bank. They include Global Blue, Premier Tax Free, Tax Free Worldwide, Innova Tax Free, Euro Free Shopping. You can find the list of banks on the website of the store where you made a purchase.

Remember that you can get a refund during a certain period of time. For example, Global Blue and Tax Free Worldwide will accept the cheques throughout 4 years after the purchase, Premier Tax Free – 3 years. Italian bank Tax Free Provider will only accept the cheques for 60 days after the purchase.